Each article of the Uniform Commercial Code is specific to certain transactions and plays a major role in the interpretation of contracts. Article 2 is a series of default rules predominately used in the sale of goods. The reason it is a series of default rules is because parties are allowed to contract out of them and courts only use the Article 2 rules if the contract itself is not clear. Therefore, it is very important for businesses to know and understand these default rules because they apply to various commercial transactions.
Four Ways Around Uniform Commercial Code Rules
Accordingly, there are really only four ways in which the UCC gap filler rules are superseded. As already stated, if the contract itself specifics what the terms should be then a court is unlikely to apply the UCC. If there are repeated occasions of performance within a contract, known as course of performance, then a court most likely will rule in accordance with the past performance.
Similarly, the course of dealing between parties who have established a particular way of dealing with each other through previous contracts also supersedes the UCC. On the other hand, if there is well known trade usage within an industry this may also prevent a court from applying the UCC.
However, the Article 2 provisions are most deficient in the coverage of mixed contracts. Mixed contracts are those that are a combination of goods and services. For instance, if you hire a painter to paint your house in which you pay for the actual paint as well as the service of painting, it is a mixed contract. Under the common law, courts take two approaches in the interpretation of mixed contracts.
The first is the predominant purpose test where courts look to the central purpose of the transaction. If the predominant purpose is for the actual goods then Article 2 applies to the entire deal. The second is the gravamen of the action test where courts look to see if there was a problem with the goods or services. If it is a problem with the goods then again Article 2 applies to the entire deal.
It is always a good idea for businesses to have a basic understanding of the scope of the Uniform Commercial Code. Yet, nothing compares to having an experienced attorney explain how a court may rule on a specific contract. Contact Eric Lanigan and Roddy Lanigan, Lanigan and Lanigan P.L., in Winter Park, Florida if your business is in a legal dispute over a commercial transaction.